from 9:05: "What works better in a lower rate environment is...

from 9:05: "What works better in a lower rate environment is cyclical. Australia will be perhaps cutting rates in the September quarter, in the back end of the year. This time next year we will likely be talking about a housing upturn; possibly a boom. We've got a very restrictive housing market that's as tight as a drum. We know the demand is there. Bang. We're away. Those cyclical businesses which require a stronger economy...the results will start to show up in 2025's numbers".

He mentions building materials stocks. Specifically, Boral and CSR, James Hardie, Reece and then Big River.

EPS forecast on Commsec has been cut from 26 cents and 26 cents for 2024 and 2025; to 23 cents / 24 cents; to the current 19 cents / 22 cents.

Even at a pessimistic 19 cents EPS, with -28% growth, we're still only on an undemanding 10x P/E ratio. A lot depends upon commercial development treading water until an uptick in residential construction begins at an unknown point in the future.





The negatives here are: BRI's lack of long ASX track record (only 7 years' historical data), the illiquid nature of the stock, a prolonged residential construction slump with higher interest rates, and the leap of faith one is taking in management which is yet to fully prove itself.

I love that BRI produces, imports, distributes, etc. its products under its own name and network. It's 100 years old. Big enough to make small earnings accretive acquisitions (yet seemingly showing enough restraint not to). A construction boom would have an out-sized effect on the earnings of a company this size. Debt is low, and I expect that February's half year report -- which will be upon us quicker than we think -- will show debt to have been paid down even more, and that BRI is almost under-geared! A small, small-cap which makes real money in a difficult environment and is heavily exposed to an expected turn-around. I like it.

From the BRI August 2023 presentation:



I see that HSBC, JP Morgan, Citicorp, UBS, etc. -- the usual suspects -- are all on our Top 20 Shareholders list. Big River is an illiquid small cap and despite a commenter on this forum mentioning it's for retail investors where the big boys can't play (something I fully believed as well until I looked further) I note that ~89% of our shares are held by the Top 20 shareholders. I wonder if we're thinly traded because most of the shares are closely-held by people who don't want to sell them, rather than a place where the so-called big boys avoid, and only us dumb retail punters are at play.




My position size, as previously mentioned is about 0.8% of my stock portfolio, not including cash on the sidelines. Even with a low-ball 12 cents a year dividend, at $2.06 we're getting at least a 5.8% fully franked dividend yield, while waiting for a residential housing recovery -- which is surely inevitable. I agree with NoLeafClover that BRI seems more interested in the day-to-day running of the business than promoting its stock. Prudent, conservative people. Nice. I have been very tempted to buy a few more this week, but remember last year's small cap sales between Boxing Day and New Year's day when, on small volume, sellers looking to exit managed to produce wild swings on thinly-traded small cap stocks. Perhaps I am over-thinking things and trying to be too clever. I keep re-learning the same lesson: when something seems cheap, just buy it. Don't wait for a cheaper price which may never come. If it gets significantly cheaper, buy more.

Regardless of that, if one feels a residential boom is imminent, BRI seems to have the most upside (and most risk) when compared to safer, large cap options. Given that enough immigrants to fill a city the size of Adelaide in a 3-4 year period have/will arrive, rental vacancies are at 1%, and Australia has the fastest-growing population of any western nation, with decade low new home build starts, blind Freddy can see Australia is grossly short of required residential dwellings. I suspect that at the first sign of rate cuts, residential construction takes-off as per the YouTube video comment above. What our EPS would look like during a prolonged residential construction boom, I have no idea but would be keen to find out!